The Bottom Line: Relative performance results lagged again this month, as did fund formations and quarterly sustainable bond issuances, but sustainable mutual funds gained assets.
New Fund Launches
The number of new sustainable fund launches, including mutual funds and ETFs in the first seven months of 2023 reached 62, identical to the total number of launches in 2022. Three new ETFs were listed in July, versus 1 in July 2022.
Net Assets: Mutual Funds and ETFs
Sustainable mutual funds and ETFs added $17.4 billion in July, registering a second consecutive monthly gain, to end the month at a high point for the year at $338.0 billion in net assets. Based on the average overall total return gain of 2.22% in July (an average of 3.07% registered by ETFs and 2.07% posted by mutual funds) recorded by 1,593 sustainable mutual funds as well as ETFs, a crude estimate indicates that net cash flows for the month were positive at $9.9 billion. Mutual funds added around $10.2 billion while ETFs experienced a narrow $0.3 billion decline.
Green and Social Bonds Issuance
Green, social, sustainability and sustainability-linked bond issuance reached $283.3 billion in Q2 2023, versus $291 in Q1, to close the first half of the year at $574.3 billion. This represents a narrow decline of $7.7 billion, or 3%.
Relative Performance: ESG vs. Conventional Indices
Sustainable mutual funds and ETFs, across all asset classes and fund categories, gained an average of 2.22% in July while the S&P 500 gained 3.21% and the Bloomberg US Aggregate Bond Index gave up -.07%. As was the case last month, four of five ESG-equity oriented securities market indices tracked by MSCI lagged their conventional counterparts. The two exceptions, again this month, are the MSCI USA ESG Leaders Index and the Bloomberg Barclays MSCI US Aggregate ESG Focused Index that outperformed by 2 basis points or performed in line with its conventional counterpart index.
Sources: Morningstar Direct, Bloomberg and Sustainable Research and Analysis
